China Advocates ‘Moderately Strengthened’ Fiscal Policy

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China’s top decision-making body, the Politburo of the ruling Communist Party, has announced plans to “moderately strengthen” the country’s fiscal policy to spur economic recovery, according to state-run news outlet Xinhua. The Politburo, led by Chinese President Xi Jinping, stated that it will persist in implementing “proactive” fiscal policies and “prudent” monetary policies in 2024 to boost domestic demand.

During the Friday meeting, the Politburo analyzed the economic agenda for the coming year and committed to enhancing “economic vitality,” addressing risks, and solidifying the upward trajectory of the world’s second-largest economy.

The Politburo emphasized that the “proactive fiscal policy must be moderately strengthened, improve quality and efficiency, and the prudent monetary policy must be flexible, appropriate, precise, and effective.”

This move comes as China’s economy faces challenges, with weakened demand for Chinese goods due to a global economic slowdown. Concerns have arisen about Beijing’s ability to orchestrate a robust post-pandemic recovery, given the impact of factors such as the struggling property market, slow global growth, and geopolitical tensions.

Despite a surprise uptick in exports, HSBC Chief Asia Economist Frederic Neumann expressed skepticism about further fiscal stimulus significantly bolstering the Chinese economy. He noted that the nation still has a “steep hill to climb.” In November, exports in U.S. dollar terms exceeded expectations by rising 0.5% year-on-year, while imports fell by 0.6%, below the consensus forecast of a 3.3% increase.

Economists have highlighted the relatively weak external demand for Chinese goods and cautioned that a policy focusing solely on the supply side might not be sufficient for sustainable results. As China navigates these challenges, the Politburo’s commitment to a strengthened fiscal policy signals a proactive approach to supporting economic recovery.